Should investors be bullish about BHP shares with the FY25 outlook?

The mining giant has slid lower. Is this a good time to invest?

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The BHP Group Ltd (ASX: BHP) share price has fallen 15.59% since the start of 2024. With the changing economic picture, investors may be wondering whether FY25 can reignite things for the ASX mining share.

In the last few weeks, BHP has attempted to take over the UK miner Anglo American, but those offers were knocked back, and now BHP shares are trading at a near 52-week low.

The price of the resource is usually a key factor in the profitability and success of commodity stocks like BHP. Let's examine what the outlook is for BHP.

Iron ore price forecast to recover

I believe the iron ore outlook is key for BHP because the iron division normally generates the most profit for the ASX mining share.

June 2024 has seen the iron ore price fall to US$106 per tonne, the lowest in two months and much lower than the start of 2024 when it was above US$140 per tonne.

The recent decline in June has been, according to Trading Economics, due to pessimistic iron ore demand expectations with China. Trading Economics noted Dexin China, a property developer, has been ordered to liquidate by a Hong Kong court just one year after a restructuring was approved. It's the latest in a string of Chinese developers to be wound up.

Trading Economics said this liquidation "added to doubts over a potential recovery" for the sector amid Chinese consumer weakness and "plunging home demand" significantly denting home sales in China. There has been a 34% year over year plunge in sales from the 100 largest Chinese constructors.

These developments have increased expectations of low iron ore demand. However, the Chinese government has proposed a number of measures to support distressed property developers and help reduce the country's rising housing inventory.

However, Trading Economics is forecasting that the iron ore price can recover based on its global macroeconomic models and analyst expectations. In 12 months, it expects the iron ore price to reach US$125.97 per tonne, an increase of almost US$20 per tonne.

If that forecast of a higher iron ore price comes true, it could significantly increase BHP's short-term profitability and help support BHP shares.

Strengthening view on the copper price

If BHP can grow its copper exposure, then copper could become a more important element for the ASX miner in the future. It wanted to buy Anglo American for the copper mines, so it will have to find another source of copper growth.

Analysts at Macquarie recently increased their forecast for the copper price for 2025 by 9% to US$9,575 per tonne. This price would represent a higher price than most of the past decade, according to Statista.

FY25 profit forecast

In terms of BHP's 2025 annual numbers, the broker UBS has forecast BHP to generate US$55.5 billion of revenue, US$0.5 billion more than what's forecast for FY24.

UBS has suggested BHP could generate earnings before interest and tax (EBIT) of US$23.6 billion in FY25, which would represent an increase of more than US$7 billion compared to expectations of US$16.1 billion of EBIT in FY24.

The broker has forecast BHP could generate US$13 billion of net profit after tax (NPAT), which would be approximately US$400 million more than FY24's estimated NPAT of US$12.6 billion.

UBS suggests BHP could pay an annual dividend per share of US$1.54 in FY25, which is US 17 cents more than the projected payout of US$1.37 in FY24.

It seems analysts are expecting FY25 to be a better year for BHP shares than FY24.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Macquarie Group. The Motley Fool Australia has positions in and has recommended Macquarie Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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